Selling a Commercial Note

While a commercial note has many characteristics in common with other note types, it has unique features. If you are considering selling a commercial note, know that the note buying companies generally consider the following property types to be commercial in nature:

Apartment buildings with more than four units

Industrial

Mixed use properties, such as when a retail shop is downstairs and an apartment is upstairs

Office buildings

Special use properties including gas stations, restaurants, motels, churches, etc. (yes, we do buy gas station notes, auto repair shop notes, church notes, and many others)

A commercial note will show the payment information, is signed by the new owners, and describes conditions relating to the payment and default. Documents like a closing statement, deed of trust or mortgage, and title policy are almost always used in the transaction.

For a commercial note buyer, some of the differences of a commercial note compared to a residential one include:

May have multiple or varying uses

Property value is often determined by income production or other factors not related to comparing it with similar properties in the area

The note is more often signed by an LLC or corporation rather than by an individual

More consideration is given to environmental concerns, zoning, usage, etc.

Getting the Best Price for Your Note

A commercial note buyer is generally able to give the best prices if the following are true:

Large down payment of at least 20%

No other liens or loans against the property

Personal guarantee on the note rather than the buyer just signing as a member of an LLC or corporation

A good credit score for the buyer – a FICO score above 650 is preferred

Strong pay history showing that the new owner can make full and timely payments

The note collateral is only the property and does not include the business

Selling a Commercial Note

If you are looking to sell your commercial note, here are the normal steps that you would take:

Contact 2-3 note buyers that are knowledgeable, experienced, and well-reviewed by the Better Business Bureau or a comparable entity.

Provide them with the requested information about the transaction, and await offers within 1-2 business days. You can expect to receive offers to buy the full note or just some of the payments.

Once a price has been agreed upon, you will be asked to submit copies of the relevant documents and provide other information.

The commercial note buyer will review the documents, order an appraisal, and later request a title commitment.

Once the above due diligence is completed, you will be sent assignment documents from the investor, which you will sign and return with your original documents.

After the assignment has been recorded with the county, the funds are wired to you. From the time that you send copies of the documents until you receive your funds is generally about 4-5 weeks. Since each note transaction is unique and commercial notes can be complex, the time period to close can occasionally go beyond five weeks.

If you are interested in discussing the sale of your commercial note, please call Alan of Seascape Capital at 1-800-634-4697.